State Bank of India (SBI) reported a net profit of Rs 3,349 crore for the quarter ended June, up 3.3% y-o-y on the back of improved asset quality. This was the bank’s first increase in net profit in the last six quarters.

Operating profit showed a healthy increase of 16.3% to R8,788 crore from R7,551 crore in the same period last year, while its domestic net interest margin (NIM) rose 10 basis points (bps) to 3.54%.

Asset quality stabilised to certain extent with the gross non-performing assets (NPAs) as a percentage of gross advances falling 5 basis points sequentially to 4.90% at the end of the June quarter. The net NPA ratio, however, saw a sequential rise of 9 basis points.

The results, however, failed to cheer the Street and the bank’s stock fell as much as 1.93% on BSE in the intra-day trade. However, the stock recovered to end the day’s trade at R2,415.25, a fall of 0.90%. On year-to-date (YTD) basis, SBI shares outperformed the markets with a gain of 36.8% against a 20% rally in Sensex in the same period.

SBI chairperson Arundhati Bhattacharya said the bank had been assessing its appetite for various portfolios of assets going forward. “The early warning system which we had promised have now been finalised and work has started on it,” she said.

In absolute terms, SBI’s gross NPAs fell marginally by 1.90% to R60,434 crore sequentially and Bhattacharya said she sees bad loans subsiding in the coming quarters, depending on the economic revival.

Recoveries in the June quarter more than doubled to R3,185 crore and the bank also upgraded accounts worth R1, 362 crore to standard category.

SBI reported a 15.11% growth in net interest income (NII) to R13,252 crore while other income fell 4.9% to R4,252 crore owing to lower gains in selling bonds as bond yields hardened to around 8.6%.

The bank provided R3,903 crore for loan losses in the quarter which was 72.2% more than R2,266 crore provided in the same quarter of the last financial year.

The mid-corporate segment formed the largest chunk of bad loans at 10.98% of the total NPAs at the end of the June quarter, followed by agriculture at 10.04% and the bank restructured loans worth R5,566 crore of NPAs in the quarter under review.

The bank suffered fresh agri loan slippages of R1,959 crore accounted by Andhra Pradesh borrowers owing to the ambiguity on loan waiver programme in the state.